Monday, 14 January 2008

How capitalism works (and sometimes doesn't)

In his recent LRB article, John Lanchester observes that "under Communism children from primary school upwards were taught the principles and practice of the system, and were thoroughly drilled in how it was supposed to work. There is nothing comparable to that in the capitalist world. The City is, in terms of its basic functioning, a far-off country of which we know little." What follows is a brilliantly lucid layman's explanation of what banks are doing with other people's money in the capitalist system, which leads up to an account of how Northern Rock is getting what it deserves: a bank run.